New Delhi: Petroleum Minister Murli Deora today met Finance Minister P Chidambaram to discuss measures to cope with record crude oil prices.
The Government had last month decided not to raise fuel prices this fiscal despite rise in cost of production due to higher international crude oil prices. Instead, the government devised a package to take care of two-third of the Rs55,000 crore revenue loss to oil PSUs. But with global crude prices crossing $96 a barrel the compensation is now being considered inadequate.
“We came here to discuss solutions (to high oil prices),” Deora said after the meeting but declined to give details.
On 11 October, the Cabinet headed by Prime Minister Manmohan Singh decided to give Indian Oil, Hindustan Petroleum and Bharat Petroleum oil bonds to the extent of 42.7% of their projected revenue loss of Rs54,935 crore on selling petrol, diesel, domestic LPG and PDS kerosene.
Besides giving oil bonds worth Rs23,457.24 crore, 35% of Rs19,227.25 crore of the total under-realisation in revenue is to be borne by upstream firms ONGC, GAIL and OIL. The remaining amount of under-recovery is to be borne by IOC, BPCL and HPCL.
“Oil prices have gone up so much... we need to urgently find a solution,” Deora said. Revenue loss if prices were to remain above $90 for the rest of the year would be close to Rs70,000 crore.
Officials said while the compensation package may be pro-rated on the increased revenue loss - 42.7% of the new figure through oil bonds and 35% from upstream firms, retailers may be given some relief through a cut in excise duty on petrol and diesel.
An official said Oil Ministry wanted Finance Ministry to bear half of the under-realization by way of issue of oil bonds and also suggested lowering of excise duties to absorb part of the impact of surge in international oil prices.
A Rs2 per litre cut in excise duty on petrol and diesel would yield about Rs14,000 crore.
The official said the ministry was not very keen on raising fuel prices for the fear of a public backlash in a year when crucial states like Gujarat go to polls. Besides, the standoff over the nuclear energy deal with the US has also raised the risk of early general election.